Entry Trailing Stop vs. Exit Trailing Stop in TradersPost
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An entry trailing stop is set when the trade is opened, while an exit trailing stop is applied only when an exit signal is sent. The entry stop moves with price from the start, while the exit stop begins trailing from the market price at the time of exit.
TradersPost allows traders to use two types of trailing stops: entry trailing stops and exit trailing stops. While both function to protect profits and limit losses, they behave differently depending on when they are applied in a trade.
Entry Trailing Stop
An entry trailing stop is set at the time of trade entry. For example:
• You buy Microsoft at $100 and set a $5 trailing stop.
• As the price moves up, the stop-loss trails behind by $5.
• If Microsoft rises to $110, the stop adjusts to $105.
• If the price falls to $105, the trade is automatically exited.
Exit Trailing Stop
An exit trailing stop is applied only when an exit signal is sent, meaning it does not trail from the entry price but rather from the market price at the time of exit initiation.
• Suppose you bought Microsoft at $100 but did not set a trailing stop at entry.
• Later, you send an exit signal and decide to apply a $5 trailing stop at that moment.
• If Microsoft is trading at $120 when the exit signal is sent, the trailing stop starts from $115 (not from the original entry at $100).
Choosing the Right Trailing Stop
• Use an entry trailing stop if you want to protect your trade from the beginning and allow it to run with price movements.
• Use an exit trailing stop if you want to manually decide when to apply a stop-loss during an open trade.
Conclusion
Entry and exit trailing stops both help manage risk, but entry trailing stops start from trade execution, while exit trailing stops apply only when an exit command is triggered. Understanding these differences ensures you are using trailing stops effectively in your strategy.